TechCrunch Sessions: Crypto 2022

Can gaming resurrect the NFT market? OpenSea thinks so • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in Crypto, NFTs, OpenSea, Startups, TechCrunch Sessions: Crypto 2022No Comments

Today at ZebethMedia’s crypto-focused event in Miami, OpenSea CEO Devin Finzer discussed his business, and the future market for non-fungible tokens. The digital assets, better known by the acronym ‘NFT,’ saw their stock rise during the 2021-era crypto boom. NFTs became synonymous with neo-wealth bubbling up from the blockchain economy, as a number of image collections that employed the digital asset format reached pop-culture status and eye-watering prices. However, as ZebethMedia has reported, the evolving market for crypto-related activities and products is currently in a downturn. NFT trading volumes are depressed compared to year-ago levels, and elsewhere in the decentralized economy there’s chaos to be found as the implosion of exchange FTX continues to reverberate. This made Finzer’s appearance at the event potentially clarifying — in the midst of a downturn, where does OpenSea see the future for its core product category? Naturally given that he’s running a company in the space, we expected optimism from the tech executive. He delivered. Inside his perspective, however, a few key themes emerged that caught our attention. (ZebethMedia has riffed on the idea of how it re-ignite consumer interest in NFTs, it’s worth noting). First, gaming. Finzer argued early in his conversation with our own Anita Ramaswamy that the world of NFTs is “quite diverse,” going on to state that NFTs in games are a place where his market is seeing an “explosion in innovation.” The CEO also cited gaming as a market opportunity for NFTs to spark more consumer enthusiasm (OpenSea is working on assisting games and gaming companies mint NFTs). The union of gaming and digital assets has proved a popular theme for press coverage and founder activity. However, much focus during the last crypto boom focused on play-to-earn (P2E) games like Axie Infinity. But while Axie has seen its fortunes rise and fall, OpenSea appears to be yet bullish to gaming-related NFTs. As a person who has spent a reasonable amount of time in games like Diablo franchise, I can imagine certain use cases for the pairing, even if I remain a little bit skeptical of bringing real-world economics into most video games. The scale of Finzer’s excitement regarding NFTs and gaming indicates to this publication that it’s perhaps where we should be most focused when covering what the asset varietal can do next. Looking more broadly at the NFT market space itself, Finzer argued on stage that platforms like Instagram joining the industry will be net-positive. In his view, inclusion of NFTs from social companies may provide an on-ramp to the crypto market for regular folks. Given that, historically, such points of entry have been criticized as too steep, new methods of getting consumers into NFTs is likely welcome to his platform. The future of NFTs may be less crypto-focused than it has been. Finzer cited the recent Reddit NFT effort in a discussion of trust, consumers, and crypto more generally. Many Reddit NFT users are not aware that it’s a crypto-powered product, he explained. If consumers are willing to engage with crypto products outside of a crypto-native experience, it is easier to see how gaming and crypto could eventually find common ground. What’s ahead for the company? Not a native token, at least not yet, per our chat with OpenSea today. The company also didn’t want to talk about potential fundraises, though we do expect it to raise more capital in 2023. After listening to the chat, it felt like the era of pricey profile pictures had faded to the background. Now we have to see if the potential use cases for NFTs in other areas of the digital economy — and perhaps even IRL — can make the jump from possibility, to reality.

‘I’m worried about the overall lack of LP appetite going forward.’ • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in Crypto, Double Down, Dragonfly Capital, FTX, Magdalena Kala, TechCrunch Sessions: Crypto 2022, Tom Schmidt, VentureNo Comments

During an unprecedented bull run, crypto-focused investors raised, and deployed, billions of dollars in capital. But now, not only are VCs operating in a bearish crypto market, they are navigating the fallout of the FTX collapse and the potential impact it will have on their investment strategies moving forward. Double Down founder and general partner Magdalena “Mags” Kala and Dragonfly general partner Tom Schmidt shared their views at ZebethMedia’s crypto conference in Miami on Thursday on what’s next in crypto in the wake of the FTX drama. Luckily, the pair each closed their respective funds this year — Schmidt’s firm closing on an “oversubscribed” $650 million vehicle — and Kala’s Double Down just one week before all the FTX goings-on went down. Both say they had already planned to proceed cautiously in deploying their capital, but now even more so. “I am worried about contagion risk and for the other shoes to drop,” said Schmidt, who counts a number of exchanges in his firm’s portfolio. “We’re still holding our breaths and taking a pause to reevaluate what we will do in the coming year.” “I’m more worried about builders not entering the space, builders leaving the space and the overall lack of LP appetite going forward,” he admitted. Kala said she feels fortunate to be sitting on dry powder in light of the current macro environment. “A lot of those who raised last year don’t want to have to raise again in 2023,” she said. “And so I think we will see a slowdown and higher bar for projects.” Schmidt said he has been “very slowly” deploying out of his firm’s third fund. “I have a reputation for being critical, and going deep to understand what’s happening,” he said. “Our long-term thesis is to use technology to create a new set of financial services, a financial substrate. And what we’re looking for are companies that fit that idea…at the same level of diligence.” A lack of diligence has been cited with regards to the FTX debacle, with many wondering how the crypto exchange managed to raise so much money despite what Schmidt called “red flags.” “The thing about FTX and Alameda is that it was so unbelievable when you heard it,” he said. “We were never fans. This was supposed to be blue chip and have blue chip investors backing them but the numbers never made sense. If you looked at how much they were making and how much they were spending on stadium sponsorships and donations, nothing really made sense.” In Kala’s view, the whole debacle highlights that “decentralization is actually needed.” But she is not surprised that many investors may have overlooked so-called red flags. “From a diligence standpoint, it can be that you see what you want to see,” Kala said. “In the moment you can be so taken by the narrative.” Schmidt believes that the past few years represented an “anomaly” in diligence and the traditional venture process. He recalls meetings with crossover funds backing a company, in some cases deploying 20x more capital than him, where the investor clearly did not have a fundamental understanding of what the company was doing. Overall, he does believe that regulation played a role in the FTX saga. “Certainly regulation could have helped. It was this certain environment that pushed them offshore,” Schmidt said. “I expect we’ll see more of an attitude adjustment…I’d like to see the U.S. be a leader on this front.” For Mala, “nothing has changed” with regard to the core fundamentals of crypto. She described FTX CEO Sam Bankman-Fried’s efforts when it came to regulation being “more like a dog and pony show.” “The real change is happening with real players,” she said. “But also the other thing that we see with VCs is that slowly we are having this change of guard who are actually knowledgeable [about crypto.]”